The ministry plans to use the funds for medium-sized highway projects that will be constructed under engineering procurement and construction (EPC) model, which is fully government funded.Rajat Arora | ET Bureau | March 15, 2016, 07:54 IST

NEW DELHI: The road transport and highways ministry is in talks to raise about Rs 50,000 crore from retirement fund body, the Employees Provident Fund Organisation (EPFO), for its highway expansion projects.

The ministry plans to use the funds for medium-sized highway projects that will be constructed under engineering procurement and construction (EPC) model, which is fully government funded.

A senior government official said the EPFO is seeking an interest rate slightly more than 8.75%, which it currently offers to its five crore subscribers. The EPFO manages a corpus of Rs 8 lakh crore.

"It's a safe proposition for EPFO because in running road projects there is a safety of regular income and yields," said Vinayak Chatterjee, chairman of infrastructure services company Feedback Infra.

The ministry has offered its toll guarantee to the EPFO. It is in final talks for a similar deal with state-run Life Insurance Corporation of India (LIC).

"In principal, both EPFO and LIC have agreed to fund us because we have high traction projects with an increase of 10% every year in our toll revenues. However, the terms are yet to be finalised," said the official quoted earlier, reques anonymity.

The ministry has also approached German, Canadian and Dutch pension funds to invest in India's highway sector by taking up government-constructed highway projects under the toll, operate and transfer (TOT) model."We have got a good response from various international pension funds. They will be coming with their local partners who will handle the operations and management of the projects," the official said.

Under the TOT model, roads already built by the National Highways Authority of India (NHAI) are awarded to the private sector in lieu of an upfront fee. The private party operates the national highway stretch and collects tolls on it for a long-term period.

The Abu Dhabi Investment Authority, a sovereign wealth fund of the Emirate, has expressed interest in taking up 50 highway projects on TOT basis. India is offering 104 road projects under the model. "Low-cost capital is what the government needs to undertake large infrastructure projects.

Since private investment is yet to pick up in the road construction sector, such financing would enable the government to revive the sector fully," said Jaijit Bhattacharya, partner at KPMG. The ministry has a target of upgrading 50,000 km state highways to NHs in the fiscal year beginning April 1.

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